626. L. C. Robbins to Harrod , 13 February 1937 [a]
[Replies to a letter not found, follows on from 624 , continues at 635 ]
10, Meadway Close, Hampstead N. W. 11.
13 February 1937
My dear Harrod,
I am really very grateful for your letter which completely reassures me on the personal issue and offers the opportunity for a few elucidations on my part which may well be overdue. I won't deny that I found your reference galling. But nobody could fail to be moved by the frank and friendly way in which you have explained it. May I try to explain equally frankly why, from my point of view, your judgment appears to rest on misconception.
Firstly I think it is a little misleading to refer to the existence of a "school" in this connection.  I know that there have been certain [b] issues in recent controversies on which more than one London man has taken the same side.  But it really is not true that at any time there has been a close "school", any more than that I have been its' leader. I have always thought it to be especially obligatory to ensure that no idiosyncrasy [c] on my part should constrict the catholicity of outlook which has always been one of the most cherished traditions in London. And if you think of the people who have emerged during the time I have been responsible for the department, I think you must admit this obligation to have been observed. Whatever you may think of Hicks, Lerner, Douglas Allen, Kaldor, Durbin, Bird, Coase and many others, you certainly must agree that they are not particularly tainted with any orthodoxy, other than that (which I know you would approve of) of not thinking that Economics began somewhere round 1930!
But this is a minor matter. As regards the actual description of my own views, I suppose the term deflationist can be made to cover a very wide species. But if it is used in the sense of supporter of general contraction, I would claim that I stand outside. I have never supported deflation in this sense and I have often opposed it. I was opposed to deflation prior to 1925.  As soon as we were off the gold standard, I urged that to try to recover the old parity would be folly.  And in recent years, I have often tried to persuade my French friends  that, once the international standard had gone, it was really fruitless for them to impose on themselves the agonies of contraction merely to keep pace with the vagaries of the pound and the dollar.  As regards the pure theory of stabilization, I have considerable sympathy with the Marshallian view that stable money incomes provoke least disturbance.  But given an international standard, today I am in fact much more expansionist than that. Given the present system of trade restrictions etc., I would prefer a secular trend of rising gold prices [d] , even at the cost of some instability.
I suppose there are two grounds on which you would hold the term deflationist to be applicable. Firstly that I am willing to support local contraction in the interests of an international standard. Secondly that I have opposed certain measures designed by their promoters to arrest a deflationary process.
On the first point I plead guilty of the substance of the charge. For reasons I have often explained I do hold that the disadvantages of monetary separatism outweigh its obvious advantages;  and I admit that to keep in step it may sometimes be necessary to contract local factor earnings. But I would urge that the description of the offence is misleading. A local contraction which is accompanied by expansion elsewhere [e] is very different from contraction all round; and I very much doubt whether discussion is clarified by putting them under the same heading.
As regards reflation in the last slump, I think you have often misunderstood my attitude.  I opposed hastily improvised public works because I saw no prospect of their being rightly timed or not incredibly wasteful.  I opposed unbalancing of the Budget because I thought--and here I think the evidence bears me out (see Condliffe Survey '35-'36, p. 255  )--that the indirect effects might be inimical to healthy recovery. As you know, I was also, rightly or wrongly, greatly concerned with the dangers of prolonging international monetary uncertainty.  But I have never been opposed on principle to anti-deflationary measures. At the present time I am wholeheartedly in favour of deferring public spending until the next depression, though I would hesitate to say anything which would raise high hopes in this connection. And I have a little plan of my own for counteracting deflation which I think does something of what you want to do by unbalancing the budget without, as I conceive it, involving the dangers of that step. 
Is this really deflationism? I grant that it is a more austere, less hopeful attitude than yours. But is it altogether unreasonable when I feel that [f] to banish such views from that middle region between deflationism and inflationism where sensible men may differ, is of stylistic rather than logical value?
On the charge of laissez faire, I confess my views are even stronger. For here I feel this [g] is not a case of a marginal extension of terminology, which, I take it, [h] is really your defence on the former issue, but of a total misunderstanding of a position which is really on a plane quite different from that you are thinking of. So far as the pure theory of the economic functions of "the" state is concerned, my position is roughly that of Marshall who felt that there were so many things that states must do that it was highly desirable that they should not cumber themselves with things which could be left to others.  But so far as the policy of actual states is concerned, I oppose many kinds of intervention because I see their cumulative indirect influence tending to industrial sectionalism, economic nationalism and anti-democratic developments generally.  And I do this for reasons which do not seem to me to have begun to be examined seriously by the majority of [i] English economists. My international Liberal Utopia involves, I fear, as much hard constructive leadership on the part of statesmen as any political ideal now fashionable.  But the kind of constructive effort and the sphere of its applicability seem to me to fall right outside the categories of contemporary discussion. I cannot believe that, whether this attitude is right or wrong, it is really very helpful to describe it as extreme laissez faire.
That broadly is the position as I would like you to see it. And while I am not such a fool as to believe that it is at all probable that any of my views are immune from error, it does seem to me that, such as they are, they will stand much less chance of contributing to the solution we are all after, if, even by friends, they are described by labels suggestive of opinions which I myself, would often tend, perhaps wrongly, to regard with impatience and <sometimes> contempt. I feel that you would regard it as a travesty of your views if they were described as inflationist and corporative. Perhaps,--I don't know,--this would be more unjust than what I am grousing about. But I think there is a certain formal symmetry about the distortion!
Of course there can [j] be no doubt that if one takes vigorous part in public discussion without at the same time publishing a sort of encyclopaedia of one's mental hinterland, some misunderstanding is inevitable. I think you are probably right in contending that your impression is fairly widespread. Certainly ever since I refused to follow Keynes on protection in 1930 I have never found the general atmosphere excessively cordial.  But while I like impersonal discussion, I dislike personal apologia: and when I encounter criticism which seems to spring from lack of a certain minimum effort of sympathetic comprehension, my impulse always is to shut up. Only when, as in this case, the <+> come from quarters where I do really attach some importance to mutual understanding, does it seem worth while trying to clear things up a bit.
I wonder whether this succeeds.
P.S. I have been wondering if there is any easily explained documentary evidence of my contentions.
On laissez faire I can only find a very energetic repudiation on pp 191-2 of the Great Depression.  You must not take the astringency of my denunciations to be applicable to our present controversy! I have a small book nearly ready  which I hope will do something to elucidate matters.
On deflation there are a good many parentheses I could cite. But perhaps the most convincing should be a document drawn up within a fortnight of Sept. 21st 1931 arguing against those of my friends who wanted to return to gold at the old level. It is the only copy I have. I wonder if you would mind returning it. 
2. See in particular the October 1931 debate on private investment and public spending in the columns of The Times between Keynes, Pigou, Stamp, Salter, Layton and Macgregor on one side, and Gregory, Hayek, Plant and Robbins on the other.
3. In "Unemployment and Labour Quietism" (The Outlook 53, 15 March 1924, pp. 172-73), for instance, Robbins identified the trade cycle as the main cause of unemployment; he argued that unemployment insurance and Poor Laws are at best palliatives, and called for a thorough investigation of the phenomenon in order to find a real remedy for it.
4. The suggestion is implicit in Robbins's account of the "Vicissitudes of Our Gold Standard", The Listener, 27 January 1932, pp. 149-50. Harrod's original observation on the gold standard is likely to have been stimulated by a paper read by Robbins before the International Monetary Problem Group at the Royal Institute of International Affairs on 14 October 1933, at which Harrod was present. There Robbins argued that a gold standard system, while not providing an ideal solution to the problem of the most desirable monetary policy, would nonetheless avoid the evils of alternative policies (Robbins, "The International Monetary Problem", mimeograph, in CH 9/6cc).
5. Robbins's French friends included Charles Rist and Jacques Rueff; as Robbins frequently travelled to France, it is likely that the remark was made orally.
6. On the position of France see note 16 to essay 16 .
7. A. Marshall, "Remedies for Fluctuations of General Prices", Contemporary Review, March 1887 (as chapter VIII of Memorials of Alfred Marshall, ed. A. C. Pigou, London: Macmillan, 1925), in particular section III.
8. Robbins's position on international monetary management was soon to be expounded in Economic Planning and International Order, London: Macmillan, 1937, chapter X on "International Money".
9. Robbins probably refers to the exchange between himself and Harrod on "Monetary Policy" in the correspondence columns of The Economist in May and June 1932 (see for references note 1 to press item 1 ), and to the discussions within the International Monetary Problem Group at the Royal Institute of International Affairs in Autumn 1933, in which both he and Harrod were taking part.
10. See for instance Robbins's dissenting notes to the Report of the Committee of Economists for the Economic Advisory Council (more on this in note 17 to this letter), in S. Howson and D. Winch, The Economic Advisory Council (1977), p. 228. The point was later stressed more forcefully in "How to Mitigate the Next Slump", Lloyd Bank Monthly Review, NS 8, May 1937, pp. 238-40 (reprinted in The Economic Basis of Class Conflict, London: Macmillan, 1939).
11. League of Nations, Economic Intelligence Service, World Economic Survey. Fifth Year, 1935/36, Geneva 1936 (prepared by J. B. Condliffe). Harrod reviewed the Survey for the Economic Journal: Harrod ( 1937:15 ).
12. See for instance L. Robbins, The Great Depression, London: Macmillan, 1934, chapter X: "Conditions of Recovery".
13. Robbins, "How to Mitigate the Next Slump", Lloyds Bank Monthly Review NS 8, 87, 1937, pp. 234-44.
14. See for instance Marshall, "Social Possibility of Economic Chivalry", in Pigou, Memorials of Alfred Marshall, London: Macmillan, 1925, in particular sections 8-10, and the fragment on p. 363.
15. On economic nationalism see for instance Economic Planning and International Order, chapter III; on industrial sectionalism see The Economic Basis of Class Conflict, part II, chapter I, § 4. See also the collective letter to The Times on "Saving and Spending", signed by T. E. Gregory, F. A. von Hayek, A. Plant and Robbins, where it is maintained that "the depression has abundantly shown that the existence of public debt on a large scale imposes frictions and obstacles to readjustment very much greater than the frictions and obstacles imposed by the existence of private debt" (The Times, 19 October 1932, p. 10).
16. Robbins described his Utopia as follows: "I look forward to a world in which the growth of international business and the migration of capital and labour have so overlaid political frontiers that the big questions of Liberalism and Socialism can be fought out on an international basis, with a minimum of obstruction from the vested interests of the local government authorities called States" ("A Revenue Tariff", letter to The New Statesman and Nation, NS 1, 28 March 1931, p. 179).
17. Robbins refers to the October 1930 Report of the Committee of Economists for the Economic Advisory Council, which he refused to sign; he wrote instead a dissenting report with a passionate plea for free trade, and on 11 November he read a paper before the London Economic Club on "Economic Notes on some Arguments for Protection" (in Economica 11, February 1931, pp. 45-62). The episode is recalled in L. Robbins's Autobiography of an Economist, London: Macmillan, 1971, pp. 155-59, while the Report--including Robbins's note of dissent--on The Causes of The Present Depression, in printed in S. Howson and D. Winch, The Economic Advisory Council (1977; the passages on tariffs are on pp. 202-11 and 221-31).
18. L. Robbins, The Great Depression.
19. L. Robbins, Economic Planning and International Order. Harrod reviewed Robbins's book for the Oxford Magazine: Harrod 1937:14 .
20. The unidentified document referred to was not found among Harrod's papers.
- a. TLS with autograph additions and corrections, three pages on two leaves, in HP IV-975-989. Headed envelope from the London School of Economics, addressed to Christ Church. Marked "From Lionel Robbins Controversy" (not in Harrod's hand).
b. Ts: «beencertain». Several spaces after punctuation are missing. These are normalized without further warning.
c. Ts: «idiosincracy».
d. Ts: «goldprices».
e. Ts: «expansionelsewhere».
f. Ts: «feelthat».
g. Ts: «that».
h. The last two commas have been added to facilitate reading.
i. Ts: «of of».
j. Ts: «therecan».
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